PHLX Semiconductor Index Enters Bear Market Despite Record Profits

The PHLX Semiconductor Index briefly entered a bear market, retreating approximately 17% from its June record. This decline occurred despite a collective 144% surge in sector profits and record-breaking individual earnings. For instance, SK Hynix reported a quarterly profit of $65 billion, a 13-fold increase for the period ending June 30, and Advanced Micro Devices reported record sales that beat analyst estimates for both revenue and profit.

The selloff was driven by exceptionally high Wall Street expectations and a significant reduction in leverage-fueled trading. Data from Citadel Securities showed individual investors net sold over $6 billion in technology stocks last week, marking the highest weekly total since at least 2019.

While the semiconductor sector faced volatility, broader markets continued to climb. The Dow Jones Industrial Average closed above 54,000 for the first time, supported by upbeat results from Caterpillar and Palantir. Some analysts now suggest that valuations for critical artificial intelligence businesses, including Nvidia and TSMC, have fallen to attractive levels relative to the S&P 500, while Yardeni Research noted that chip-stock fundamentals have not seen notable declines.